(MENAFN- KNN India) The Central Board of Direct Taxes (CBDT) has come up with draft norms for introduction of 'range concept' for calculating Arm's Length Price for valuing transactions between related entities for the purpose of taxation.
The tax department has proposed to use multiple year data for determining the Arm's Length Price. At present, only one year data is used for calculating Arm's Length Price.
Finance Minister Arun Jaitley had in July 2014 announced in his Budget speech that the 'range concept' would be introduced in the Indian transfer pricing regime. It was also announced that use of multiple year data would be permitted for undertaking comparability analysis.
The CBDT has now specified that 'range concept' can be used only in case the method used for determination of 'arm's length price' is Transactional Net Margin Method (TNMM), Resale Price Method (RPM) or Cost Plus Method (CPM).
"The purpose of amendment of section 92C (2) of the Act was to facilitate introduction of "range" concept for determination of Arm's Length Price of an international transaction or a specified domestic transaction. Further, use of multiple year data for comparability analysis for the purpose of transfer pricing was also to be incorporated," Finance Ministry said in a release today.
The use of multiple year data and "range" concept in transfer pricing regime is proposed to be incorporated through amendments to be made to Income-tax Rules, 1962, it added.
The Finance Ministry has also called for the comments and suggestions from the stakeholders on the draft regime by May 31, 2015.
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